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Money markets us commercial paper outstanding falls


commercial paper outstanding fell $10.2 billion in the week ended Oct. 10, according to data issued by the Federal Reserve on Thursday. U.S. commercial paper outstanding, not seasonally adjusted, fell $10.7 billion in the week. U.S. foreign bank commercial paper, not seasonally adjusted, rose $900 million. Meanwhile, general collateral repo rates remained elevated as $100 million in Treasury bill auctions settled on Thursday and in anticipation of Monday's settlement of this week's set of coupon auctions.

The government sold a total of $66 billion in three- 10- 30-year Treasuries this week on Tuesday, Wednesday and Thursday, respectively. BAILOUT PROSPECTS KEEP SPANISH REPO RATES STABLE

Meanwhile, the cost of borrowing cash using Spanish government bonds as collateral was little changed on Thursday as the prospect of European Central Bank debt purchases offset the impact of a downgrade of Spain's rating. Standard & Poor's cut the country's rating to BBB-minus, with a negative outlook, just one notch above non-investment grade and in line with fellow agency Moody's, which is expected to conclude its own rating review this month. Usually, when debt is downgraded, rates in repo markets - where bonds are used as collateral to borrow cash - go up. That is because the price of the bond falls and the value of the collateral is perceived as having depreciated.

However, the likelihood that Spain will eventually ask for a bailout kept markets stable."The rates which people are actually lending at have not changed much; (the S&P move) only brings it in line with Moody's ... and the market is much more focused on whether they're going to ask for a bailout or not," one repo trader said. The one-week repo rate for trades using Spanish bonds as collateral was unchanged at 0.15-0.16 percent, according to traders. A well-bid Italian debt auction also helped increase investors' appetite to take risks."Repo rates didn't move because in the short-term risk (sentiment) is still on and the Italian auction was fine," said Matteo Regesta, rate strategist at BNP Paribas.

New zealand tops world bank survey as easiest place to do business


New Zealand edged out Singapore as the easiest country for doing business in the World Bank's latest rankings, while several emerging market countries improved the most by pursuing business-friendly reforms. In its annual "Doing Business" report, the World Bank cited reductions in labor-related taxes and new regulations that make paying taxes easier as key reasons for moving New Zealand to the top spot from its previous runner-up position. Macedonia broke into the coveted top 10, while Brunei had the biggest improvement, moving to 72nd from a rank of 84th last year as it made electricity supply more reliable, passed a new insolvency law and increased protections for minority investors. The World Bank report tracks regulatory changes in 190 countries for businesses throughout their life cycle - from the ease of business start-up regulations and getting credit to property rights.

It said a record 137 economies made reforms to make it easier to start and operate businesses in the last year, with more than 75 percent of the changes occurring in developing countries. Kazakhstan rose to 35th place from 41st, with big weight given to its improvements in business start-up regulations, construction permits and power availability. Rounding out the 10 most-improved countries were Kenya, Belarus, Indonesia, Serbia, Georgia, Pakistan, United Arab Emirates and Bahrain. This year's report tracked gender differences in scores for starting a business, registering property and enforcing contracts, finding discrimination that lowered the scores of 38 economies. Twenty-three of those had more procedures for women than men to start a business, and 16 limited women's ability to own and transfer property.

The 184th-ranked Democratic Republic of Congo, for example, requires a married woman to have her husband's authorization to incorporate a business, the study said. The World Bank says better performance in the "Doing Business" rankings generally equates to lower levels of income inequality and reduced poverty."Simple rules that are easy to follow are a sign that a government treats its citizens with respect," the World Bank's chief economist, Paul Romer, said in a statement. "They yield direct economic benefits - more entrepreneurship, more market opportunities for women, more adherence to the rule of law."

Most of the top 10 shifted around a bit, with Denmark staying in third place, Hong Kong edging higher to fourth from fifth, trading places with South Korea, and Norway rising to sixth. The United States, the United Kingdom and Sweden ranked slightly lower. Somalia was rated as the hardest country to do business in the latest survey.

Obama announces changes for student loan repayment


President Barack Obama told students at Georgia Tech on Tuesday he wants to make the process of repaying student loans easier to understand and manage. Obama signed a “student aid bill of rights” and spelled out an assortment of policy tweaks and projects to try to make it easier for people with student loans to pay back their debt.“We're going to require that the businesses that service your loans provide clear information about how much you owe, what your options are for repaying it, and if you're falling behind, help you get back in good standing with reasonable fees on a reasonable timeline,” Obama told a raucous crowd of more than 9,500 students.“We're going to take a hard look at whether we need new laws to strengthen protections for all borrowers, wherever you get your loans from,” Obama said.

Obama has asked the Treasury and Education departments and the Consumer Financial Protection Bureau to report by Oct. 1 on whether bankruptcy laws or other laws or regulations should be changed for student loans. The lending industry has resisted loosening bankruptcy standards for student loans, but advocates have argued students burdened by heavy debt should be able to more easily use that as a way to discharge their obligations. The review will focus on private student loans that do not carry protections given to federal student loan borrowers, such as the ability for borrowers with permanent disabilities to discharge loans, an administration official said.

The White House said 40 million Americans have student loans. More than 70 percent of U.S. students who graduate with a bachelor’s degree leave with debt, which averages $28,400. The White House said it will require clearer disclosures from companies to make sure borrowers understand who is servicing their loan and how to set monthly payments and change repayment plans.

Obama will direct his Education Department to create a system by July 1, 2016, to better oversee and address complaints from borrowers about lenders, servicers and collection agencies, the White House said.

Pre cap loans a moveable feast for sponsors


Bull markets produce innovation. The latest novelty in U.S. leveraged loans is a pre-capitalization or pre-cap financing, which allows companies to keep existing financing and capital structures in place if they are sold. Pre-cap loans reappeared in 2012 after debuting in 2005. Six were completed in the U.S. last year and they look set to remain a feature of 2013. The structure is good for private equity buyers and sellers which save paying a new set of fees. Change of control provisions are not triggered, which usually prompt an expensive refinancing. The portable pre-cap structure is less popular with investors, which are wary of losing control over who they are lending to. Pre-caps remove a happy dilemma for private equity firms - whether to refinance and take a dividend from a portfolio company or wait and sell the business later - by allowing them to do both."It's very compelling for a private equity sponsor who has been in an asset for a while, who wants to monetize but is not ready to sell yet," said Jeff Cohen, co-head of U.S. loan capital markets at Credit Suisse (MLPN. P), which pioneered the structure and completed five deals last year. Credit Suisse led a $1.06 billion credit, a $660 million term loan B and a $350 million second-lien loan for Atlantic Broadband ATLBR. UL in March 2012 to refinance existing debt and provide a $345 million dividend to owners ABRY Partners and Oak Hill Capital.

A few months later, Atlantic Broadband was sold to Canadian cable company Cogeco Cable (CCA. TO) for $1.36 billion, which used the $660 million term loan B to fund part of the purchase. Easing buyout concernsPre-caps are useful in a weak M&A environment and a hot capital markets climate as they ease buyout barons' concerns that they could be missing a refinancing window and give investors a supply of high-yielding paper. Outside a bull market, investors would not give up their right to choose their borrower. Even yield-hungry investors are disdainful of the structure, which one source called an abrogation of his fiduciary duty. Other lenders with a more sanguine view argue that companies are the same regardless of financial owner.

"We are sensitive. But you can't make a blanket rule that you won't do it," said Jonathan Insull, managing director at Crescent Capital Group. "Each one has its own set of circumstances."Investor reservations and several failures mean that only top companies qualify for precaps. NEP Broadcasting NEPBC. UL pulled a dividend effort and Hyland Software dropped the provision."It requires a very strong market and a very strong transaction. You need a very attractive credit that is going to draw heavy oversubscription" said Tracy Mehr, managing director at Jefferies. The investment bank completed P2 Energy Solutions' latest $355 million debt tap as a pre-cap, which waived the change-of-control provision from the close of the deal until the end of 2012.

Some restrictions have been put in place around acceptable buyers, equity contributions and leverage tests. The duration of change-of-control waivers is also usually capped. The largest precap to date - Kronos's SEHWKR. UL $1.9 billion dividend recapitalization, structured by Credit Suisse for Hellman & Friedman and JMI Equity, came with conditions. Change of control provisions will only be waived for a maximum 18 months if the new owner is a private equity company with assets above a certain size, makes a minimum equity contribution and meets a maximum debt incurrence test when the M&A deal closes. The structure has given Kronos more financing options and saved $15 million to $20 million in additional financing costs which will boost profits for the selling sponsor, Cohen said. Bankers do not see the pre-cap becoming a market norm, as covenant-lite loans are now, as it is only used in specific circumstances. This will not stop buyout firms trying to make the latest innovation a trend."Certain sponsors are looking to make this into a permanent feature," said Richard Farley, a partner at Paul Hastings. So far, though, "No one has bitten."